24-12-09 Copenhagen Delivers More Talks (Subscribers Only)

Thursday 24th December 2009

As the dust settles on the UN climate conference in Copenhagen, debate rages about whether it was a success or a failure. The CarbonEdge view is that the opinions that really count on this front are those of the countries that will ultimately sign up to any deal. On that basis, in this summary for CarbonEdge subscribers, we continue with our approach of ignoring the noise and focusing on the key issues.

There has been so much written and there will be so much more, we will keep this brief and for further details, provide you the links to the formal documents.

 

What actually happened at Copenhagen?

Prior to the Copenhagen meeting, there was no expectation of a legally binding agreement being concluded. In the end, there was no new agreement, just a political statement brokered and it would appear almost unilaterally announced by US President Barack Obama. Kevin Rudd was part of the group that drafted the accord. To read the full text of the 'Copenhagen Accord', click here.

The key points are:

  1. developed countries to provide their 2020 emissions reduction targets to the UN by 31st January 2010
  2. developing countries to provide their mitigation measures to the UN by 31st January 2010
  3. earliest possible implementation of programs to reduce emissions from deforestation and degradation under the REDD Plus program. Those subscribers who requested more information on REDD Plus negotiations can click here to review the formal documents. The January/February edition of CarbonEdge will include analysis on REDD Plus outcomes
  4. funding of US30 billion per year for 2010 to 2012 from developed countries to be split evenly between adaptation and mitigation in developing countries
  5. funding commitments of US100 billion per annum by 2020 from developed to developing countries

 

Was Copenhagen a vast failure as suggested by the commentariat?

We take Chinese Premier Wen Jiabao's point that China considers Copenhagen a success because there was movement from all sides. Click here to read more. He is right and much of that movement has come from the 'emerging economies' who account for a significant proportion of global emissions and almost all of the emissions growth to 2020. Movement from the developed nations was considerable, especially on finance.

It is the least developed countries - not all of them granted - who want a better deal. They say there is nothing for them to lose because now they just continue to lose anyway.

 

Now its' on to Mexico

Despite the details and the actions for early 2010, there is no prospect of an agreement before the end of the year in Mexico. With the central American leftist democracies right on the doorstep, Mexico City will make Copenhagen look mild. They will be lead by Venezuela's master of political rhetoric, Hugo Chavez who bitterly opposed the Copenhagen Accord.

Without something new to break the deadlock, the least developed countries and the Alliance of Small Island States (AOSIS) will oppose 2020 emissions reduction targets that would limit global warming to an average 2 degrees celsius on the basis that figure is too high not to impact on millions of the world's poorest people. AOSIS argues that the evidence indicates their countries will be mostly underwater with an average temperature rise above 1.5 degrees celsius. Ian Fry, the Australian who negotiates for Tuvalu was most passionate on this topic. Click here to read more.

For their part, developed c0untries can only get to targets that would limit global warming to 2 degrees celsius if they are confident that the emerging economies - China, India, Russia, Brazil, South Africa and so on - will make significant efforts towards reducing emissions. Without that, significant economic activity will transfer to these countries at the expense of developed countries.

It seems that the way Copenhagen played out, targets and their impact on limiting the effects of global warming are the key, but money is the lock. The start has been made but it is clear that one of the strongest arguments being mounted by the developing countries is that for every tenth of a degree of warming that the targets fail to limit, a further +/- US10 billion per annum of funding to developing nations will likely be required to limit the human impact. India for one has conceded this claim was part of them 'gaming the system'.

As UK Prime Minister Gordon Brown has commented, there are just a few countries standing out from a legally binding agreement. True enough, but it is also the case that the developed nations must move first and most to break the global deadlock.

 

Where to for the CPRS and what does Copenhagen mean for business?

The national business representatives have suggested variously that the CPRS should be scrapped or that the compensation to industry should be increased because they would be exposed without an international agreement. Arrant nonsense of course because no international agreement would have equalised global arrangements, but understandable.

Using the nominal failure of the Copenhagen negotiations, Tony Abbott's Liberal Party will stand stridently opposed to the emissions trading scheme. The Nationals of course will not be shifting. Politically, they are right to do so because with all of the attention the CPRS has received, most voters will be wary of action ahead of the rest of the world and suspicious of those proposing it. Whether they are right as a matter of policy, time will tell.

Bob Brown on behalf of the Greens is describing the next election as a referendum on climate change. He wishes, but it will not be so. At a more practical level, Brown signalled that the Greens will negotiate with the Government, so long as the Government lifts its 'unilateral action' target to 25% and works from there. He wishes, but it will not be so. An exhausted Penny Wong said as much on her return to Australia.

For the Government's part, they are committed and Kevin Rudd has re-committed to submitting the legislation a third time, at the first sitting in February. That signals an intention either to negotiate because the emissions trading scheme cannot pass in its current form or perhaps, an intention to let the legislation die and use legislative inaction on climate change by the Liberal and National Parties as a campaign tool if not an election trigger.

At the same time as it recommits the CPRS legislation, the Government will announce its unilateral 2020 emissions reduction target. Expect that figure to be in the range of 6 to 8 percent, not the 25 percent or more Bob Brown is 'demanding', nor the straight 25 percent suggested by Professor Ross Garnaut. To read more, click here.

In all, it is difficult to see business certainty before the end of 2010 and really, it seems no closer than prior to Copenhagen. Underscoring the lack of confidence in the future of trading based mechanisms for greenhouse gases, the futures price for carbon has crashed since Copenhagen and will not recover any ground until at least mid-January.

24th December 2009

 

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